NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Uncertainty and the Disappearance of International Credit

Joshua Aizenman, Nancy P. Marion

NBER Working Paper No. 7389
Issued in October 1999
NBER Program(s):   IFM

We show that increased uncertainty about the size of an emerging market's external debt has a nonlinear and potentially large adverse effect on the supply of international credit offered to them. We also show that if international creditors are first- order risk averse, attaching greater weight to utility derived from bad outcomes than from good ones, a moderate increase in uncertainty about debt overhang or about other relevant factors affecting repayment prospects-- can cause the supply of credit to dry up completely. We therefore offer one possible explanation for why emerging markets may find themselves suddenly cut off from international capital markets.

download in pdf format
   (313 K)

email paper

This paper is available as PDF (313 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7389

Published:

Users who downloaded this paper also downloaded these:
Hausman and Rigobon w9424 An Alternative Interpretation of the 'Resource Curse': Theory and Policy Implications
Ramey and Ramey w4959 Cross-Country Evidence on the Link Between Volatility and Growth
Aizenman w7398 Capital Controls and Financial Crises
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us